Key facts:
Exchange houses must apply KYC and anti-money laundering procedures.
The new regulatory scheme will require exchange houses to submit annual reports.
According to the second round of regulatory guidance for industries, the supervisory entity of the Hong Kong stock exchange will begin to treat cryptocurrency trading platforms as traditional stock exchanges, if they offer securities tokens.
On Wednesday, the Hong Kong Securities and Futures Commission (SFC) revealed a document establishing its position on the exchange houses of digital assets or cryptocurrencies, in which they announce a new licensing scheme, which they claim is no different from the It applies to the Hong Kong stock exchanges and automated trading centers.
Any cryptocurrency company that trades at least one value token will fall under the jurisdiction of Hong Kong regulators. Applications for peer-to-peer exchange houses (P2P), as well as decentralized exchange houses (DEX) or non-custodial trading platforms, will not be examined by the SFC.
Under the new permit conditions, regulated cryptocurrency exchange houses can only offer their products to “professional investors” as defined by the SFC. The companies, following the approval of the regulators, could also modify their services and products and must have an existing relationship with an independent auditing industry, and annually they must fill out reports on the activities of the exchange house. The exchange houses must also submit monthly reports to the commission.
Hot wallets, cryptocurrency storage centers with internet connection, cannot keep more than 2% of the total funds of the exchange houses. In that same order, the exchange houses will have the obligation to have insurance for all assets, so that they can be backed up in the event of a violation or an attack on the platforms, the SFC said.
Anti-money laundering and knowing-your-client (KYC) procedures are cited as a major concern, so the SFC says that cryptocurrency exchanges should take steps to "establish the complete and true identity of each of its clients, of the financial situation, their experience in investments and the investment objectives of these ».
When licenses are guaranteed, companies enter the SFC Regulatory Framework, which, according to regulators, offers more accurate monitoring reports and standards.
Hong Kong regulators also issued warnings on Wednesday for those suppliers of cryptocurrency-based futures products, which target Hong Kong citizens without proper documentation. The SFC said that to date “they have not licensed or authorized any person within Hong Kong to offer or trade digital asset futures contracts” and that it remains “unlikely that they will grant licenses or authorizations to carry out a business under those contracts. ”
Cryptocurrency derivatives providers, such as BitMEX and OKEx have already restricted access to their products to citizens in Hong Kong.
The first licensing scheme referring to cryptocurrencies, which was initially presented in November 2018 and which has been updated this October, referring to exchange houses that invest 10% or more of their cryptocurrency portfolio, have only given their approval to a single investment fund in the past year.
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